The Government of the Republic of India and the Government of the Democratic Socialist Republic of Sri Lanka desiring to conclude a Convention for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, have agreed as follows :
Personal Scope
This Convention shall apply to persons who are residents of one or both of the Contracting States.
Taxes covered
This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State irrespective of the manner in which they are levied. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital including taxes on gains from the alienation of movable or immovable property as well as taxes on capital appreciation.
The existing taxes to which this Convention shall apply are:
In Sri Lanka
- The income-tax, including the income-tax based on the turnover of enterprises licensed by the Greater Colombo Economic Commission and
- The wealth-tax
(hereinafter referred to as Sri Lanka tax).
In India
The income-tax including any surcharge thereon
- The surtax and
- The wealth-tax
(hereinafter referred to as Indian tax).
Business Profits
The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as are attributable to:
- That permanent establishment
- Sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment,
- Other business activities carried on in that other State of the same or similar kind as those effected through that permanent establishment.
Dividends
- Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
- However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends.
Interest
- Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
- However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 10 per cent of the gross amount of the interest.
Royalties
- Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
- However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalty, the tax so charged shall not exceed 10 per cent of the gross amount of the royalties.
Last Updated on: 19-05-2010
